Durex maker SSL jumps on takeover approach

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The Independent Online

The top management at SSL International could net almost £1.5m if the struggling maker of Durex condoms succumbs to a takeover approach that could value it at more than £600m.

Shares in the company jumped 8 per cent yesterday to 335p after it revealed that it was in bid talks. SSL, which also owns the Dr Scholl footcare group, is already in talks to sell its medical division.

City sources said Reckitt Benckiser, the Anglo-Dutch household products giant, has been running a slide rule over SSL. Both companies will come under pressure today to clarify their positions when they issue trading updates.

The company is believed to be nearing a sale of its medical arm, which includes Regal Biogel surgical gloves and Hibi antiseptics, to ABN Amro Capital, analysts said. SSL announced the disposal to enable it to focus on its consumer brands.

A sale of the whole business would trigger controversial pay-offs for Brian Buchan, the chief executive, and Gary Watts, the finance director, who were brought in to salvage SSL's fortunes two years ago.

Both men are on two-year contracts in the event that they are sacked after a change of control and 18-month contracts if they choose to leave following a sale. This could see Mr Buchan pocket £878,000 while Mr Watts would receive £582,000. The contracts, which are contrary to best practice, enable so-called "rewards for failure" in the event that investors feel management has underperformed. They are likely to attract criticism at SSL's annual shareholders' meeting this morning.

Standard Life, one of SSL's top shareholders with a stake of almost 3 per cent, said 370p-per-share would be "a reasonable starting point".

SSL said talks were at a "preliminary" stage and "may or may not lead to an offer for the group". Mr Buchan added: "With brands as strong as these there's bound to be interest in the group. But it remains business as usual for SSL as we continue with the sale of the Medical business and the growth of our consumer brands."

The company has had a torrid few years. The current management team was installed after dubious marketing practices were uncovered in 2001. Although the group returned to the black earlier this year, reporting pre-tax profit of £39.1m, a string of profit warnings helped to drive the share price down to a 12-year low in April.

Analysts also cited two American groups, Kimberly-Clark and Johnson & Johnson, as possible suitors as well as any number of private equity houses. But speculation centred on Reckitt Benckiser, home to brands such as Dettol antiseptic and Vanish soap. The group, which has no debt, has been on the prowl for suitable acquisitions for months. It has promised to return cash to shareholders this year if it does not manage to find a target.

"SSL has struggled because it had too few brands through too big a distribution network," Michael King, an analyst at Panmure, said.

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